The Consumer Financial Protection Bureau joined with state attorneys general and a state regulator to take action against Prehired for deceptive marketing and debt collection practices.
The action represented a victory for Delaware Attorney General Kathy Jennings, whose office had been involved in dealings of the company after 280 collection lawsuits ended up in the state’s court system.
Prehired operated a 12-week online training program, claiming to prepare consumers for entry-level positions as software sales development representatives with the potential “six-figure salaries” and a “job guarantee.”
According to the CFPB, Prehired had applicants sign an “income share” loan to finance the program’s costs, claiming that consumers would pay nothing until they got a high-income job through Prehired.
Below is a video from the company.
The agency and McGuiness stated that Prehired buried terms that required consumers to pay even if they never got a job and, in many cases increased consumers’ required minimum monthly payments without any evidence that they had secured employment or experienced an increase in income.
The CFPB seeks to void the loans and obtain relief for affected consumers and a penalty, which would be deposited into the CFPB’s victims’ relief fund.
Attorneys general from Washington, Oregon, Minnesota, Illinois, Wisconsin, Massachusetts, North Carolina, South Carolina, Virginia and Delaware joined the action, along with California’s Department of Financial Protection and Innovation.
Prehired is a limited liability company incorporated in Delaware and has two debt-collection companies, Prehired Recruiting in South Carolina and Prehired Accelerator in Florida.
The company gained the attention of the Delaware AG’s office when it filed more than 280 lawsuits in Delaware courts against borrowers who entered into income share loans that it claimed were in default. Prehired Recruiting sought to collect $25,000 from each consumer for a total of more than $7.2 million.
When Prehired Recruiting’s Delaware debt collection lawsuits came under scrutiny from the AG’s office and the courts, Prehired allegedly changed the terms of its contracts with consumers to force them into arbitration. None of the consumers subject to Prehired’s change in terms had agreed to arbitration.
Both before and after Prehired filed its lawsuits in Delaware, debt collectors asked customers to sign settlement agreements that it described as beneficial to consumers. However, the agreements released consumers’ claims against Prehired and its debt collectors and converted the income share loans into obligations requiring monthly payments for several years, according to the CFPB.
